The medicinal marijuana industry has little to do with the legalization of the street drug, and everything to do with breakthroughs in medical treatments. Cannabis-based medicines are getting serious attention from the medical profession as legitimate treatment options for patients. (See also: The Marijuana Business: Growing Like a Weed.)
Companies that develop marijuana-related compounds rarely focus exclusively on cannabis. Be aware that stocks that may appear to be “mainstream” may actually be positioned to profit from loosened restrictions on marijuana. (See also: Marijuana Vote Could Boost These Stocks.)
Four stocks stand out as the most likely candidates for profiting from medicinal marijuana in 2017. They were chosen based on the market potential for cannabis-based drugs that have been developed or are currently under development by each company.
All figures are current as of January 16, 2017.
AbbVie Inc.
AbbVie (ABBV) is ahead of the field in medicinal marijuana because its cannabis-based drug Marinol has already been approved by the Food and Drug Administration and is currently being marketed. Marinol relieves nausea and vomiting in patients undergoing chemotherapy. It is also used for AIDS patients who have lost their appetites, making them want to eat again.
Marinol is not the company’s big seller. The question is whether increased acceptance of cannabis-based medicines will boost sales of the drug. Company revenues, gross profit and net income have been flat for the past four quarters, so unless Marinol raises profits, this is best treated as an income play rather than a growth stock for 2017.
Its 4.13% dividend yield is attractive for income investors. AbbVie has had 44 years of consecutive dividend increases. Over the past three years, the dividend has grown 12.5%.
GW Pharmaceuticals
It could be that GW Pharmaceuticals (GWPH) is the growth play in the medicinal marijuana field. The company has researched marijuana-based medicines since 1990 and has a promising drug called Epidiolex. The drug has not been approved by the Food and Drug Administration, but it is showing effectiveness in treating epileptic seizures. It is cannabis-based and could gain wide acceptance quickly if approved.
Analysts expect GW Pharmaceuticals stock to soar if Epidiolex is successful. Trials are in late stages, so investors may start sending the stock higher in 2017 by snapping up shares before the drug gets approval.
InsysTherapeutics
Insys Therapeutics (INSY) had two cannabis-related drugs approved by the FDA. The company’s drug Syndros is based on tetrahydrocannabinol (THC), the most well-known chemical in marijuana. It is used to treat anorexic patients by stimulating hunger. Of all the company’s drugs, Syndros has the most potential to be a bestseller.
Insys revenues and income grew steadily from 2012 through 2015, though the September 30, 2016 report showed a dip in those figures.
The stock hit a high above $45 per share in August 2015 and dropped from there. As of this writing, it is priced at just over $10. Anyone investing in this company would be banking on a turnaround in the stock, based on its cannabis-based medicines.
Cara Therapeutics
The case for Cara Therapeutics (CARA) is based on its portfolio of drugs that target immune cells, as well as a drug that is still in development that is designed to relieve acute pain in postoperative patients.
The company has had negative income and would need to hit a home run to become profitable. However, investors have sent the stock higher since last July, when it crashed below $5 per share. It is now trading above $11 per share.
The promise of its cannabis-based drug portfolio, along with agreements to develop and market drugs in Korea and Japan, make Cara Therapeutics stock a potential winner for 2017, but investors must be willing to accept higher-than-average risk.
The Bottom Line
The companies on this list are making serious efforts to develop effective medicines based on cannabis. These companies deserve all the due diligence an investor would use before investing in any company. If you invest in potential, understand that the risk is high that any of the drugs discussed in this article could fail or disappoint. Some medicinal marijuana stocks will no doubt succeed in 2017, so research and vigilance should be your guides when navigating this burgeoning but volatile industry.